12 Months of Tariffs

Over a year after Section 301 and Section 232 tariffs were introduced, changes, mainly increases, in the tariffs are still being introduced and discussed regularly.

Section 301 Update

In early May 2019, President Trump released a series of tweets threatening significant tariff hikes that would go into effect later that week on May 10th, 2019. Trump indicated in his tweet that he was unsatisfied with the speed of the trade talks with China saying, “The Trade Deal with China continues, but too slowly.” After a setback in trade negotiations, the existing 10% tariff on List 3 goods increased to 25%. This increase affected products with a total import value of $200 billion.

Additionally, President Trump said another $300 billion worth of Chinese goods would soon face a 25% tariff. Proposed List 4 encompasses almost all Chinese origin products not already included in Lists 1 through 3. This tariff was set to go into effect as early as July 3rd, 2019 causing an additional duty charge of up to 25%. However, on June 29th, 2019 at the G-20 summit, Trump announced that these tariffs would not be imposed while trade talks are still underway. The announcement comes as a surprise after the abrupt halt to negotiations in early May. In addition to postponing List 4, President Trump has also removed the ban on the Chinese tech company, Huawei. China’s agreement to increase its purchases of U.S. agricultural goods is also another integral step in restarting negotiations.

Section 232 Update

In June 2018, additional tariffs of 25% and 10% were imposed on steel and aluminum imports. These tariffs are determined based on Country of Origin and affects almost all countries. In May 2019, the US came to an agreement with Mexico and Canada, in which the section 232 tariffs were removed for these countries.

While new tariffs continue to roll out and the impact of the tariffs increase, several strategies have proven to be effective in lowering or completely avoiding these duties.

Exclusions

Companies and trade associations may request that specific products be excluded from the additional tariffs. This is available for Section 232 through the Department of Commerce, and for Section 301 through the U.S. Trade Representative. Requesting Exclusions has proven to be a slow process through both agencies but has been successful in many cases. The exclusion window for List 3 has been open from June 30th, 2019 to September 30th, 2019. This gave companies three months to request an exclusion on products that they view as critical to the U.S. economy.

HTS Classification

Classifications of potentially listed items should be vetted by an expert. Facing a potential 25% duty increase, being sure about the classification should be the first step.   

Importers may also mitigate the impact of additional tariffs by legally manipulating products, thus changing their classification. Products can be imported in unfinished conditions, or the products components can be imported separately in order to take advantage of classifications not subject to 232 or 301 tariffs.  

Country of Origin

CBP’s rulings on substantial transformation can also be used to the importers advantage. Companies who are able, can shift parts of their operations out of countries impacted by additional tariffs. While goods can still be sourced from these countries, if substantial transformation occurs, the Country of Origin will be the country in which the finished product was produced.

Duty Deferral

For companies that manufacture products within the US, utilizing bonded facilities can help avoid the impact of 301 and 232 tariffs. Manufacturers can import foreign goods into an FTZ under privileged foreign status. This will allow the goods to retain their original tariff classification, even in situations where the goods are manufactured into products that additional tariffs apply to. The goods can then be exported out of the US without paying additional tariffs. For companies not involved in manufacturing, foreign goods can be stored in a bonded warehouse for a period of 5 years. This may allow time for exclusions to be granted, or additional tariffs to be revoked.

Companies can also file for drawback on goods being imported from China and later exported out of the United States. Drawback can provide companies with a refund of up to 99% of the duties and fees paid, however, duties paid under section 232 are not eligible for duty drawback. This remains a viable option for companies being hit with lofty 301 tariffs. 

Section 321

Another option to lower the impact of section 301 tariffs is using section 321. Under this section, goods with a value of less than $800 may be exempt from duty. While this can be used to avoid the impact of section 301 tariffs it is not an option for section 232 tariffs.

Despite the constantly changing trade environment, companies can successfully avoid, or at the very least reduce, the impact of section 301 and 232 tariffs. Shifting operations, filing drawback, and requesting exclusion may seem like a daunting task but companies that adapt can find significant savings.

Other Tariffs to Look Out For

While it seems like significant progress is being made on the US and China trade deals, trade tensions are on the rise between the US and the European Union. In April 2019, the USTR released a list of $21 billion worth of EU goods. These tariffs were released as a response to a long-time dispute over unfair subsidies on large civil aircraft companies, Boeing and Airbus. On Monday July 1st, 2019 the USTR announced that another 89 tariff subheadings, with a value of $4 billion, are being added to the existing list. The proposed tariffs, now covering $25 billion worth of goods, are subject to arbitration by the World Trade Organization and public comments in the United States. The WTOs finding are expected to be released by September this year.

If you would like more information on Section 232 or 301 duties, or any other trade related matter please contact Allyn International at sales@allynintl.com.

About Allyn International

Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. With clients ranging from from small local businesses to Fortune 500 firms, Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China, Prague, Czech Republic, and Dubai, UAE. For more information, visit www.allynintl.com.

Contributor: Amanda Williams